Intel Lost $1B in Mobile Last Quarter

Intel announced their quarterly results today. Revenue was $12.8B, up 1% from a year ago with operating income of $2.5B also up 1% from last year.

Since the future of the world is mobile and not desktop/laptop, the mobile results are the most interesting. Mobile sales fell 61% to $156M. This includes mobile products and anything Atom. They lost $929M in mobile, close enough to $1B for the headline to this blog. As Brian Krzanich said on his Reddit AMA:we wanted the world of computing to stop at PC’s and the world never does didn’t stop innovating…we missed the mobile move.

Looks like they are still missing it.

PC and datacenter volumes were up 1% and 3% respectively. PC prices were down 3% year to year and datacenter up 8% year to year. That meant that PC was $7.94B, $2.8B of which was profit. Datacenter was $3.09B of which $1.32B was profit.

Internet of things (IoT) rose 32% to $482M. I’m not completely sure what is in that business, but nearly half a billion that is a significant sized business.

Intel reduced headcount by 1000 people (to 106,000) and their cash position fell by $1B during the quarter although they still have $19B of which $11B is trapped offshore, presumably to avoid corporate income tax.

So, bottom line, server sales are healthy but mobile sales are coughing up blood. Of course, in some sense Intel participates in mobile through server sales. The paradigm of the future is a mixture of mobile devices such as smartphones along with cloud datacenters which, despite ARM’s efforts, are still an Intel stronghold.

They are predicting revenue of $13B in Q2, up a little from this quarter. In the CFO’s commentary on the conference call they said:we are forecasting the midpoint of the gross margin range for the second quarter to be 63%, a 3% increase from the first quarter. This is primarily driven by lower factory startup costs as we ramp 14nm, higher platform volume write offs as we qualify the first 14nm products. This is partially offset by the increase in tablet volume and related contra revenue dollars.

I think that means that they are saving some money by putting a fab in Arizona on ice and running 14nm in an existing fab, meaning that they get a 3% increase in gross margin, which is significant. Plus they are selling more tablets (which I assume are in PC not mobile) although I think that they are starting from a pretty small base.

More articles by Paul McLellan…